BasilBush

Apologies in advance to the Mods if this thread covers similar issues to the hot topic of Gold change fees etc, but I did want to widen out the discussion.

Many of the responses on that other thread acknowledge why BA might want to make such changes to EC rules (basically to boost revenue) and also accept that few people are likely to desert BA (largely because the alternatives are unpalatable).

That set me thinking that maybe BA's (and the EC's) market position is so strong that they feel they can get away with behaviour/actions that would not be possible in a well-functioning competitive market. If so, that could amount to abuse of BA's market power, and might be grounds for a competition inquiry.

I hear you all say that the airline market is a highly competitive one, and this is generally true. But I think that the way in which European flag carriers have developed over time (basically as national monopolies) has given them key advantages in their home markets which do not apply (for example) to the US airline market.

As a UK resident with varying travel patterns, the only sensible frequent flyer scheme for me to focus on is BA's EC. Other schemes may work for certain geographical destinations, but only BA can realistically offer me the range and depth of services. If I'm to focus on a single FF scheme - and that's the ultimate objective of loyalty schemes - it's difficult to consider anything other than the EC.

EC members (or those in the UK at least) are therefore less free to switch away from BA if the terms and conditions worsen. This is unlike the situation in the US where most US residents can make a realistic choice between the three main carriers (AA, UA and DL). Equally, BA cannot seek to justify the terms of the EC by comparing itself with AF or LH (for example) as those carriers have a similar advantage to BA in their own home markets and are also therefore partially insulated from competitive pressures.

Please don't think that I'm being hypercritical of BA, but I do wonder whether this possible lack of competitive pressure is a factor in the regular questions on this forum as to why US FF schemes often have better benefits. Things such as same-day standby, better upgrades for top-tier members, much lower fees for redemption bookings etc. Is it that the US market is so competitive that no single airline can adversely change its terms without suffering a loss of custom? And that such things are the ones most valued by FFs? Whereas BA's FFs are much more captive, and that BA can make adverse changes to its terms and conditions apparently at will and with no notice/consultation.

If my theory on BA's market power is correct, then there may be grounds for argument that BA is abusing its market position. The way in which today's changes were introduced would tend to indicate a rather high-handed approach at the very least.

I am not a competition lawyer but maybe some readers of this thread are. Am I barking up the wrong tree, or is there a germ of an argument here? If there is evidence of market abuse, what would be the first steps in getting the competition authorities to take this further? It would be good to put a shot across the bows of BA - after all, the threat of a fine of up to 10% of annual turnover is much more likely to be effective than any number of letters to Franck van der Post.

kitbag1984

It's true. BA are dominant in the majority of places in the UK now. The purchase of BMI only strengthened that.

Of course lack of competition means they can do whatever they want to increase profit as the passenger can't go anywhere else.

This vague notion of loyalty that some people believe is simply non exist ant amongst the large corporations. Despite all the marketing.

Watch them slowly take away things and see what we are left with.

HIDDY

I really can't see how something they have been charging the majority of their customers can now suddenly be construed as an abuse of power. After all it's not obligatory for you to join their programme.

BerksFlyer

As this was such a long original post I have chosen to cut the most relevant part for my thoughts in response, but other parts are relevant too.

Your post seems to suggest that your primary reason for flying is a FF scheme, bit surely the main reason for flying is to get from A to B and a FF scheme is secondary.

I would say that BA face significant competition from many airlines and other forms of transport but few of them have FF schemes. You seem to have discounted them as irrelevant whereas I'd argue that they're not irrelevant.

revan

Can BA abuse their market position in 2nd behind EasyJet?

Hoch

I'm not entirely sure the importation of a US air model is appropriate given that the thrust of the
argument is a violation of EC competition law. That written, I always thought that the thrust of
the policy of abuse of a dominant position lied in the behaviour of the firm with market power, than
the existence of the power in of itself. I believe that the extent of the dominant position relates
to a position of economic strength enjoyed by an undertaking which enables it to prevent effective
competition being maintained on the relevant market by giving it the power to behave to an appreciable
extent independently of its competitors, customers and ultimately of its consumers.

In my view, BA altering benefits of its FFP is not an abuse of its dominant position, if it indeed
has one, because 1) consumers do not have to join it and 2) there are other competitors in the
market place for consumers to choose from. Just because BA's benefits do not correspond to say
LH is hardly grounds for saying that there is a lack of competition with the FFPs.

I am happy to be corrected by learnt FTers as it has been quite a while since I last dealt with
matters relating to competition

H

710 77345

Perhaps Berksflyer, but would a SilverJet / MaxJet / Eos plane be more popular if it could hand out Avios with each ticket given?

Looking at the performance of other airlines, it looks like the recipe for success out of London is either to be very cheap (Ryanair or Easyjet) or offer flights from Heathrow with Avios. There's an argument to be made that BA's transatlantic rivals offer better business products than BA's own, and despite the DL/VS tie-up offering great frequencies on certain routes, and that the prices are similar, BA's planes are busier.

BA's huge route network out of London makes them the only game in town for a large proportion of fliers, and the Avios bonanza you receive with each longhaul BA flight means it's hard for a new entrant to be able to compete.

Captain Schmidt

I get the gist of your argument, but your point about the US isn't really true.

Most US residents are just as limited in their choices as those of us resident in Western Europe. BA is dominant in London, but DL has the same dominance in ATL, MSP and DTW. AA is the only realistic game in town in Dallas, UA in Houston etc. I lived in Chicago for 2 years. My choice was between AA or UA. DL was a non-starter for me due to its limited presence in Chicago.

I actually think the US and EU markets look quite similar these days. Each has three major players and each has a string of LCC carriers that provide an alternative and arguably, Europe has more options for LCCs than the States does these days.

Globaliser

A change / cancel fee used to be charged to Blues, Bronzes and Silvers but not to Golds, GGLs, CCRs or Premiers.

This has been amended so that the change / cancel fee will be charged to Blues, Bronzes, Silvers and Golds but not to GGLs, CCRs or Premiers.

You want to erect an abuse of market power argument on the back of that?

jacobitetraveller

an FF scheme has got absolutely nothing to do with the competition laws which are in place

BasilBush

No, I didn't mean to suggest that. Rather that FFPs are a powerful marketing tool that has an impact on inter-airline competition. And that this impact is reinforced by the imperfect competition between European carriers due to their historical origin as national carriers. And I don't think the easyJet analogy really affects this as (a) they only operate short-haul, and (b) they are (not yet anyway) a full service carrier with premium classes etc.

I'm grateful for Hoch's input, but I do still think there is a line of argument that BA's competitive pressures are blunted by such factors, and that the outcomes (eg in terms of high YQ charges etc etc) are not those that would be expected in a well-functioning competitive market. The only such model I can think of is the US one, but surely EU competition law wouldn't restrict itself to EU examples in looking at optimal market behaviour?

And Globaliser, although I was indeed prompted to write this by today's events it is an issue I've mused over for a while, namely why the BA EC has a number of negative features that are not observed elsewhere (eg high YQ charges). I'm sure others will point to positive features of the EC, but I just wanted to fly a kite and see whether anyone else has thought along these lines.

Final 3 Greens

I love to do an experiment.

In 12 months time, cancel all Heathrow slots and put them up for auction to the highest bidders.

Then see who is dominant.

BasilBush

Happy to be corrected on this but I recall that the impact of FFPs on competition has been a relevant factor in a number of airline merger proposals. Isn't it common sense that airlines would only have FFPs if it gave them a competitive benefit (versus not having an FFP)?

luckyjim

I think there are far more obvious indicators of market power than the issue you mention. The fuel surcharge policy for one. There may not be outright (and illegal) collusion but is an oligopoly at best.

CCayley

Indeed, but the fact that airlines offer frequent flier benefits implies they are attempting to compete with one another. If BA really thought it had an enormous captive market of frequent fliers who had no choice but to fly BA, the logical response would be to scrap the Executive Club altogether. And if BA did that I can't see how competition law would interfere - an airline surely can't be required to operate a frequent flyer scheme.